TMI Blog2010 (3) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statutory provision in question, in determining whether the same is in consonance with legislative mandate - Rule cannot be interpreted de hors the legislation and particularly in fiscal jurisprudence if Rule departs from legislative intent that may cause peril to public revenue. - no refund can be granted under the rules and the notifications in respect of services other than the services consumed for providing output service in view of the express language used in the statute - ST/304, 341, 321, 344, 337-338, 343, 367, 388, 460 - 590-601/2010 - Dated:- 19-3-2010 - Dr. Chittaranjan Satapathy, Member (T) and Shri D.N. Panda, Member (J) REPRESENTED BY: S/Shri Sachin Aggarwal, Advocate, Jitin Christofar, CA. and P. Joseph, for the Appellant. Ms. Sudha Koka, SDR, for the Respondent. [Order per: Chittaranjan Satapathy, Member (T)]. - Heard both sides. This group of twelve appeals involve similar issues and hence these were listed together and heard together partly on 28-1-10 and the hearing was continued and concluded on 29-1-10. Out of these twelve appeals, six have been filed by the assessee appellants and six have been filed by the department. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artered Accountant's Services 2 Aon Specialty Services (Out- put service: Business Support Services) 1. Management, Maintenance or Repair Service, 2. Business Support Services 1. Clearing and forwarding Agent's Services 2. Manpower Recruitment and Supply Agency Services 1. Management or Business Consultant's Service, 2. General Insurance Service 3 Fidelity Business Service Ltd. (Output service: Business Auxiliary Service) 1. Management, Maintenance or Repair Service , 2. Tele communication Service (partially allowed) 1. Advertising Agency Services 2. Management or Maintenance Repair Service, 3. Manpower Recruitment and Supply Agency Services, 4. Security Agency Services. (partially allowed) 1. Advertising Agency Services 2. Architect Services, 3. Clearing and for warding Agent's Services, 4. Commercial Training and Coaching Services 5. Courier Services 6. Erection, Commissioning and Installation Services 7. Event Management Services 8. General Insurance Services 9.Insurance Auxiliary services 10. Management or Business Consultant's Service, 11. Management, Mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a related issue that arises in this context is whether credit in respect of such services is admissible in respect of the respective output services exported by the assessees indicated under column 2 of the Table above. The departmental appeals also challenge the orders of the lower appellate authority on the ground that he has not kept in view the provisions of clause 5 of the Notification No. 5/06-C.E. (N.T.) dated 14-3-2006, while allowing refund of the entire amount of credit. Before taking up the arguments advanced on behalf of both sides, for clarity sake, we first examine the legal provisions relevant in the context of these cases. 5. The Cenvat Credit Rules, 2004, have been made by the Central Government in exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 and Section 94 of the Finance Act, 1994. The provisions of the Finance Act, 1994 continue to govern the field of service tax in the absence of a separate law enacted by the Parliament to deal with this important and growing field of taxation. The enabling provisions under Section 37(2) allow the Central Government to make rules, inter alia, for the following:- "(xvi) provide for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are there to make rules for rebate of service tax paid or payable on the taxable services consumed or duties paid or deemed to have been paid on goods used for providing taxable services which are exported out of India. 8. These provisions make it clear that in respect of output service exported, the Government has the power to make rules for providing credit of service tax paid on the services consumed for providing such service. Similar power also exists for providing rebate of service tax paid or payable on the taxable services consumed for providing output services exported. In other words, the law provides for making rules for allowing credit of service tax and rebate of service tax on taxable services which are consumed for providing output services for export. We are not concerned in this case with output services which are not exported. Since the legislature has used the expression "services consumed for providing a taxable service" for the purpose of making rules for grant of credit of service tax, it follows that the rule making power has to be exercised by the Central Government within this mandate of the statute. In other words, the rules cannot provide for credit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Finance Act, 1994, for making rules for refund of cenvat credit. Only in Section 37(2)(xxiii) of the Central Excise Act, 1944, there is a reference to form and manner in which application for refund shall be made under Section 11B of the Central Excise Act, 1944. Yet, Cenvat Credit Rules, 2004, contains Rule 5 which specifically deals with refund of Cenvat credit. Rule 5 provides for refund of unutilized credit of service tax in respect of input service used in providing output service which is exported. 12. Thus, we find that different expressions have been used in the Act and the Rules. As pointed out earlier, under Section 94 of the Finance Act, 1994, the expression used is services consumed for providing a taxable service, under Rule 2(1) the expression used is any service used by a provider of taxable service and under Rule 5 thereof, the expression used is input service used in providing output service. Under Rule 5 of the Cenvat Credit Rules, 2004, Notification No. 05/2006-C.E. (NT.), dated 14-3-06, has been issued providing for safeguard and limitations for granting refund of service tax in respect of input service used in providing output service, which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticks for establishing the nexus for taking of credit and for refund of credit. Even if different phrases are used under different rules of Cenvat Credit Rules, they have to be construed in a harmonious manner. To elaborate, the definition of input ser vices for manufacturer of goods, as given in Rule 2(l)(ii) of Cenvat Credit Rules, 2004, includes within its ambit all services used "in or in relation to the manufacture of final products" and includes services used "directly or indirectly". Similarly Rule 2(l)(i) of Cenvat Credit Rules also gives wide scope to the input services for provider of output services by including in its ambit services "used..., for providing an output service". Similar is the case for inputs. 3.1.2 Therefore, the phrase, "used in" mentioned in Notification No. 5/2006-CE. (N.T.) to show the nexus also needs to be interpreted in a harmonious manner. The following test can be used to see whether sufficient nexus exists. In case the absence of such input/input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service. In the case of BPOs/Call Centres, the services di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in all cases including the pending claims with immediate effect. 3.2.2 Procedure : The exporter should, along with the refund claim, file a declaration containing the following details: (Rs. in lack) Details of goods/services exported on which refund of input credit is claimed S. No Details of shipping bill/ Bill of export/export documents etc. Details of input credit on which refund claimed (1) (2) (3) No. Date Date of ex port order Goods/service exported Invoice No., date and Amount Name of service provider/supplier of goods Service tax/Central Excise Regn. No. of service provider/ supplier of goods Details of service/goods provided with classification under FA 1994/Central Excise Tariff Service tax/Central Excise duty payable Date and details of payment made to Service provider 1. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llustration prescribed under para 5 of the Appendix to the notification should be viewed in this light. However, in case of service providers exporting 100% of their services, such disputes should not arise and refund of Cenvat credit, irrespective of when he has taken the credit, should be granted if otherwise in order. Such exporters may be asked to file a declaration to the effect that they are exporting 100% of their services, and, only if it is noticed subsequently that the exporter had provided services domestically, the proportional refund to such extent can be demanded from him. 3.4 Incomplete invoices [para 2(e) above]: In case of incomplete invoices, the department should take a liberal view in view of various judicial pronouncements by Courts. It had earlier been prescribed in Circular No. 106/09/2008-S.T., dated 11-12-2008 [2009 (13) S.T.R. C3] that the invoices/challarts/bills should be complete in all respect. This circular was issued with reference to Notification No. 41/2007, dated 6-10-2007 as specific services eligible for refund under the notification has been specified. Thus, a stricter requirement exists under the said notification for ascertaining the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such service. (12) Exported services should not be treated as exempted service as clarified in Board's Circular No. 868/06/2008CX., dated 9-5-2008. (13) The assessees do not have to prove usage of input service in rendering output service when availment of credit on the same is not disputed earlier in the show cause notice or in the orders passed by the authorities below. (14) The assessees have availed credit on the impugned services and have disclosed the same in the periodic returns filed. Hence, they have subjected themselves to the scrutiny of the department on this score. Hence, it follows that the assessees have passed the test of eligibility to the credit and therefore, the same cannot be questioned at the time of considering refund of unutiized credit. (15) The extent and scope of the definition of input services has to be ex pounded in a liberal expansive way so as to include all activities relating to business. 15. The appellants are also relying on the following case laws in support of their claim for refund of unutilized credit of service tax:- (a) Mahindra Sona Ltd. v. CCE, Nasik - 2009 (15) S.T.R. 474 (Tri. - Mum.) Cenvat credit of Service tax - Inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which had already been enumerated in the submission of the appellants. Once the taxable service is exported and various input services have been utilized for providing the output service the appellants could be entitled for the rebate, which is equal to the service tax paid on the input ser vices. Going by the definition of the 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 the service utilized by the appellants for providing output service can indeed be considered as input services. We also take note that the definition of 'input service' indicates that the interpretation should be done in a liberal way in view of the phrase 'activities relating to businesses.' There cannot be any dispute that the input services rendered by the appellants are all activities relating to the output services exported by the appellant. Moreover, on going through the records, we are satisfied that the appellants had fulfilled the five conditions of Notification No. 12/2005 already enumerated in the submission of the appellants. In these circumstances, the impugned orders do not have any merit. The appellants are entitled for the rebate in respect of all the rebate claims filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the definition of input service, yet it is an activity relating to business as this facility is provided exclusively to employees in the factory. Canteen facility is beneficial for workers as they are served food stuff at concessional rates and it is they who are engaged in the business of appellants which is nothing but manufacture of goods. In any case, canteen facility can also be said to be used by manufacturer indirectly, it is only for the benefit of employees who play a significant role in the activity of manufacture. Provision of can teen is also mandatory as per Factories Act, 1948. [para 7,8,11] (h) Indian Rayon Industries Ltd. v. CCE, Bhavnagar - 2006 (4) S.T.R. 79 (Tri. - Mum.) Cenvat credit of Service tax - Service tax paid on mobile phone is available as credit to eligible service providers of output service and manufacturers in absence of any express prohibition under Cenvat Credit Rules, 2004 applicable during the material time - Board's old Circular No. 59/8/2003-S.T., dated 20-6-2003 cannot be pressed into service against appellants - Rules 4(1) and 4(7) ibid. [paras 3,4,5] (i) Capiq Engineering Pvt. Ltd. - 2009 (245) E.L.T. 186 (T) = 2008-TIOL- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring employees to work and take them back is claimed as refund) (7) Service tax on expenditure incurred towards entertainment (8) Courier charges (9) Motor vehicle insurance (10) Fixed Assets Insurance (11) Service tax on Security charges towards deputing security at the accommodation provided by the company for executives. (12) Service tax on hiring of drivers for driving cars are not claimed. (13) Professional services like consultancy charges related to income tax etc, are not claimed. 17. Ms. Sudha Koka, Ld. SDR, appearing for the department states that the orders passed by the lower appellate authority are not legal and proper for the following reasons:- (a) The orders do not take into account the conditions laid down under Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006, which are relevant for allowing refund of unutilized credit of service tax. (b) Rule 20) of Cenvat Credit Rules, 2004 deals with what credit is admissible to a provider of output services Only that part of such credit which is attributable to the provision of exported output services can be allowed as refund. The burden is on the assessees to establish which part of the credit is attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservance of even a procedural condition not to be condoned if likely to facilitate commission of fraud and introduce administrative inconveniencies. (7) Sarabhai M. Chemicals v. CCE, Vadodara - 2005 (179) E.L.T. 3 (S.C.) Interpretation of statutes - Exemption notification - Conditions for exemptions have to be strictly construed (8) UOI v. Ganesh Metal Processors Industries - 2003 (151) E.L.T. 21 (S.C.) Interpretation of Exemption notification - Where language used is nambiguous nothing is required to be added or included in the same so as to arrive at the presumed intention of the legislature language of explanation V to notification No. 175/86-CE. being clear and not making any distinction between types of payments received by exporters to Nepal, no such distinction is to be made in its interpretation. [para 6] (9) Maruti Suzuki Ltd. v. CCE, Delhi-III, 2009 (240) E.L.T. 641 (S.C.). (i) Cenvat/Modvat - Input, scope of - Crucial requirement that all goods "used in or in relation to the manufacture of final products" qualify as "input" - Expression not a standalone item but to be read in entirety as "used in or in relation to manufacture of final product whether directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the rule making powers contained in the statute under Section 37(2) of the Central Excise Act, 1944. 19. We have considered the submissions made from both sides as well as the case records, the cited case laws and the Circular dated 19-1-10. We note at the outset that all these appeals relate to cases of export made by export oriented units. We also note the anxiety of the Government as reflected in the Circular dated 19-1-10, that the Government wants to refund the accumulated input credit to the exporters and zero-rate the exports. 20. In the said circular, note has been taken regarding use of different phrases in the relevant rules and notifications. In addition, we find that the expression used in the Act is also different. As pointed out in para-6 above, the legislature uses the expression services consumed under Section 94(ee) and (eee). The rules made taking recourse to the statutory provisions contained in the Act and the notifications issued there under have to be interpreted in the context of the expression used in the Act. 21. All the rules of procedure are the handmaid of justice as held in Kailash v. Nanku - AIR 2005 SC 2441. In the State of Punjab and Anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts from legislative intent that may cause peril to public revenue. 23. We find that as a part of the Budget proposal this year some amendments have been made. Notification No. 5/06-C.E. (N.T.) dated 14-3-06 issued under Rule 5 of the Cenvat Credit Rules, 2004, has been retrospectively amended as follows:- (1) The words "in relation to" have been added in main condition (a) of the Notification. (2) The word "in' contained in main condition (b) of the said Notification has been replaced with "for". (3) The illustration given in condition 5 of the Appendix to the Notification has been deleted. We, however, find that neither the Act, nor the Rules have been retrospectively amended. 24. Some prospective amendments have also been made to the said Notification No. 5/2006-C.E. (NT.), dated 14-3-06, requiring certification of details relating to refund claim including certification by a Chartered Accountant, 25. These changes, do not alter the fact that the expression used in the Finance Act, 1994, speaks of services consumed for providing a taxable service and the expressions used in the Cenvat Credit Rules, 2004 and in the Notification issued there under are different. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xporters on their own and the admissibility of such credit was not examined by the fie officials at that stage since there was no duty payment involved on the output service exported and therefore, no assessments were made. Accordingly, we hold that before granting refund the field officials will be at liberty to verify the admissibility of the credit. 28. The next question that arises is whether a particular service can be considered as an input service for a particular output service or not. As stated earlier and reflected in the Table in para-3, the original authority has allowed the refund for certain services holding those services to be input services. Since neither side has appealed against the decisions of the original authority in regard to these services, we express no opinion about the same The services listed in column 4 of the Table are the ones in respect of which the lower appellate authority has allowed refund and the department has come in appeal to the Tribunal The services under coloum 5 of the Table are the ones in respect of which neither the original nor the appellate authorities have allowed refund and therefore, the assessee appellants are in appeal claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific output service, the claimed input service should also be required to meet the tests specified in the afore-cited decision of the Hon'ble Supreme Court, though the same were rendered in the context of goods rather than services. Further, it would also have to be kept in view that the Hon'ble Supreme Court has held in the case of Maruti Suzuki (supra) as follows:- "Mere fact that the item is a packing material whose value is included in the assessable value of final product will not entitle the manufacturer to take credit." The process undertaken by the appellant assessee to produce the exported output service may also have to be examined to determine what input services have been consumed in the process following the decision of the Hon'ble Supreme Court rendered in the case of CIT New Delhi v. Oracle Software India Ltd. - 2010 (250) E.L.T. 161 (S.C.), though the same was rendered in the context of 'manufacture'. 31. We also note that the services for which refund has been claimed include almost all kinds of services received by the appellants. Some of the appellants have claimed refund of service tax paid on insurance services, chartered accountant's services, couri ..... 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